Should You Be Adding Eagle Materials (NYSE:EXP) To Your Watchlist Today?

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Eagle Materials (NYSE:EXP). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for Eagle Materials

Eagle Materials' Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. It certainly is nice to see that Eagle Materials has managed to grow EPS by 21% per year over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Eagle Materials shareholders can take confidence from the fact that EBIT margins are up from 26% to 29%, and revenue is growing. Both of which are great metrics to check off for potential growth.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

Fortunately, we've got access to analyst forecasts of Eagle Materials' future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Eagle Materials Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$9.3b company like Eagle Materials. But we are reassured by the fact they have invested in the company. Notably, they have an enviable stake in the company, worth US$121m. Holders should find this level of insider commitment quite encouraging, since it would ensure that the leaders of the company would also experience their success, or failure, with the stock.

Should You Add Eagle Materials To Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Eagle Materials' strong EPS growth. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in Eagle Materials' continuing strength. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. Before you take the next step you should know about the 1 warning sign for Eagle Materials that we have uncovered.

Although Eagle Materials certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with insider buying, then check out this handpicked selection of companies that not only boast of strong growth but have also seen recent insider buying..

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.